Photo: RNZ / Mark Papalii
There are increasing calls for the government to take action over power prices, as surging bills have many New Zealanders – particularly those on lower and fixed incomes – feeling the strain.
One veteran is suggesting a royal commission of inquiry, while a high-ranking minister is talking up renationalising the entire sector.
Pensioners and beneficiaries also have just three weeks of the Winter Energy Payment left this year, which provides eligible singles a boost of just over $20 a week and couples just over $30. But some of those receiving the payment say they still cannot afford power bills, and are going to bed early or using log burners to cut down on costs.
Retail prices have recently been rising faster than inflation, while wholesale prices have gone up so much even one of the world’s biggest and most profitable companies does not want to pay them.
About 300,000 households had overdue fees added because they could not afford to pay their power bills on time last year.
‘Market solutions that don’t deliver’
New Zealand First minister Shane Jones wants his party to consider a policy of renationalising the gentailers – the big electricity companies in New Zealand that both generate and retail power.
He has written to his leader, Winston Peters, about options for delivering internationally competitive energy prices. The ideas have also been shared with the other coalition parties.
“Winter prices reached $250 a megawatt hour, which is going to lead to mass unemployment and deindustrialisation,” Jones told Morning Report on Wednesday.
“We should start by nationalising the ability within the power system to offer affordable energy during winter – that’s where the real stress is. That’s currently controlled by Indonesian coal decline worsened by declining gas.
“And the gentailers are not offering a buffer, they’re not offering security, and they don’t exist to offer security, and I understand that. They exist to offer net profit after tax.”
The government has a majority stake in three of the four gentailers – Meridian, Genesis and Mercury – while Contact is privately owned.
The logic of having several power companies was that they would compete with each other for customers, keeping prices down.
“The reality is the market solutions that don’t deliver for the people, that don’t deliver dividends to keep power at an affordable, secure level, you cannot have a modern economy,” Jones said.
“Everyone knows where I come from on this issue, and I’ll probably come off second best because I’m talking about what the party wants and I’m not the minister.”
The power sector comes under the state-owned enterprises portfolio, he said, which is currently with National’s Simeon Brown.
Jones said his paper had a range of options, including – according to the NZ Herald, which had seen it – increased use of gas, building another coal-powered station, government signing long-term contracts to guarantee supply, splitting the gentailers into generators and retailers, and nationalising the entire system.
He rejected the possibility of boosting the Winter Energy Payment.
“The energy payment goes from the taxpayer to [customers], and where do they go? They go straight into the pockets of the gentailers. I mean, it’s absurd. We are just enriching these gentailers who are never ever going to deliver affordable energy or secure energy, and they’re very honest about that. They don’t exist for that.”
Jones said voters should expect to see New Zealand First campaigning on changes sooner rather than later, once the party had figured out its preferred course of action.
“All I’m doing is putting all of the options out there, but know this from me – unless we can reduce the costs of electricity that are driven by the gentailers in the face of winter shortage, we are going to witness mass unemployment and deindustrialisation…
“No one will be any doubt that the days of treating energy prices as a private commodity and expecting the market to save New Zealand jobs and regional New Zealand, that type of folly in our view, has run its course.”
‘It’s just too tough’
Wellington retiree Judith Aitken is a former regional councillor and public servant who has worked for the former Ministry for Energy and the former state-owned Electricity Corporation of New Zealand.
Her electricity supplier Mercury recently wrote to her to say her daily charge was increasing from 20c to more than $1.
“I thought that was absolutely outrageous,” she told Morning Report on Wednesday.
She is currently working on a book about her time in the sector, starting with changes made in the late 1980s.
“One of the interesting things about that is, it was premised on the basis that there would be competition in the energy market, and that competition would maintain a power and an influence over prices. That hasn’t happened.
Judith Aitken.
Photo: supplied
“What has been created is, energy companies – the gentailers as they’re called, which have both production of electricity and the retail, the three main ones which dominate the market are all state-owned, so they’ve been highly beneficial and the state is not likely to look very, very comfortably at reducing it.
“For example, since they were established in the 1990s, they’ve paid some some $9 billion in dividends to the shareholder, which is the state, and they’ve invested only about $1.5 billion in new capacity. So there’s no surprise really that we’re short of energy.
“Therefore, the electricity prices have gone up, the fixed charges have gone up, and the pensioners and the retired people – particularly, single people or people who have others to support like grandchildren, lots of people are looking after their grandchildren these days – it’s really too tough. It’s just too tough.”
She was in favour of means-testing the Winter Energy Payment, but also increasing it as power prices increase.
Surge in switching providers
Twice as many people had sought help from the Powerswitch service this year.
The service, run by Consumer NZ, helped people find the cheapest gas and electricity plans, sometimes advising them to switch companies.
Its head, Paul Fuge, said they have had 3000 queries this year, as well as a big boost in visits to their website. He said some smaller companies were nervous to take on more customers because the wholesale power prices were so high.
Fuge said bold reform was needed to ensure the market worked for people.
“We can’t keep lurching from crisis to crisis. Not only is it affecting households, it’s a threat to our economy in general. Something needs to change… we can’t just keep tinkering.”
Call for deeper probe
While support for individual household investments into renewable energy and energy efficiency can be good, for example solar panels on the roof and insulation, Aitken said people on fixed incomes – such as retirees – were “very unlikely to have sufficient capital”.
“I don’t have either insulation or double glazing, and what is more, at 88, I’m not likely to ever have sufficient income to pay for either of those. They’re really out of reach.
“I think what is really needed in my view is a serious look at the whole electricity market, not the power review which has just been done, which was far too simplistic and far too narrow.
“I think there needs to be something like a royal commission on the energy market looking at why the energy market is not now competitive as it was expected to be in 1987, why it operates so badly, and why the charges that are distributed in electricity payments are so severe for so many people.”
The Electricity Authority announced in August it was changing sector rules to require retailers with more than 5 percent market share to offer time of use prices from the middle of next year, after a report by a joint task force of the authority and the Commerce Commission.
The changes were aimed to give consumers more choice in how and when they use power, and put downward pressure on prices.
Also last month, a letter was sent to Prime Minister Christopher Luxon calling for an urgent reform of the sector as soaring power prices undermine confidence and productivity. It took aim at the four big power generation/retail companies – Genesis, Contact, Mercury and Meridian.
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